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TMI Blog1998 (4) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment should not be disallowed under section 37(2B) of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee was entitled to deduction in respect of service fees paid for trade mark 'Tebilized' ?" The matter relates to the assessment year 1977-78. In the relevant previous year, the assessee claimed deduction of Rs. 9,675 as expenditure incurred on refreshment, etc., which was disallowed by the Income-tax Officer. The Commissioner of Income-tax (Appeals), however, allowed the same, which decision came to be confirmed by the Tribunal. The relevant previous year was 1976-77. Explanation 2 was inserted in section 37(2A) retrosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng food, etc., to its employees is concerned will have to be separately worked out from the total amount of deduction at Rs. 9,675 and the rest of the amount which is included in the definition of entertainment expenditure by way of Explanation 2 will have to be disallowed. In a similar context, this court in Saraspur Mills v. CIT [1997] 226 ITR 533, after referring to the decision of the Supreme Court in CIT v. Patel Brothers and Co. Ltd. [1995] 215 ITR 165, observed that so far as the entertainment expenditure is incurred for persons other than employees, the assessee was not entitled to deduction thereof. The matter was referred back to the Tribunal for deciding the same in accordance with law. We, accordingly, hold that the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tably while leaving the fixed capital untouched. It was held that the agreement permitting the assessee to make use of the particular process and the user of the trade-mark "Tebilized" did not create any asset nor did they confer any right of a permanent nature in favour of the assessee, but the agreement merely enabled the assessee to confer on the product the advantages of better quality and marketability. It was held that the payment of royalty was, therefore, clearly in the course of the profit-earning process and not for acquisition of an asset or right of a permanent character and, therefore, deductible as revenue expenditure. In view of the above decision taken by this court in a similar context, we hold that the Tribunal was right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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